ASIC launches formal investigation into Bathla collapse amid private credit crackdown

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ASIC Commissioner Simone Constant says the collapse of Bathla Group is a cautionary take for the private credit sector. The post ASIC launches formal investigation into Bathla…

Private credit funds are being warned to shape up or face the wrath of the corporate regulator after it confirmed a formal investigation into collapsed developer Bathla Group.

The private credit-backed builder was a cautionary tale about the poor practices rampant in the private credit sector, despite repeated calls to fix dodgy valuations, complex structures and insufficient disclosure, ASIC Commissioner Simone Constant said.

She confirmed the watchdog had begun a formal investigation into the conduct of Bathla, as ASIC released its latest surveillance of the private credit sector on Tuesday.

ASIC was also making inquiries in relation to private lenders, but had not yet begun any formal investigation, she said.

Many of the poor practices around fees, disclosure, distribution and conflict-management – identified by the regulator’s first private credit report a year earlier – remained.

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“We’ve seen pockets of improvement, and indeed we’ve called out some better practice in this report, but in a consistent and comprehensive way, we haven’t seen the improvement,” Constant told AAP.

The review of 24 wholesale and retail private credit funds, together responsible for $18 billion in assets under management, found complex and opaque structures were rife.

The collapse of Bathla, owing $3.4 billion to creditors, was a “concerning and dark case study” of why those practices needed to be rooted out, Constant said.

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